T.K. Jayaraman, Member (T)

1. This appeal has been filed by Revenue against the OIA dated 4-1-2002 passed by the Commissioner of Central Excise and Customs (Appeals), Cochin.

2. The issue involved in this appeal is regarding the valuation of Physicians Samples for free distribution among Doctors through Medical Representatives. The Commissioner (Appeals) has held that it is more appropriate to adopt the Rule 6(b)(ii) of Central Excise Valuation Rules, 1975 for valuation of the physicians samples as the adoption of Rule 6(b)(i) is not proper. He has given the following reasons in the impugned order :

(i) The packing of the goods, which has a considerable influence in the assessable value of the final product, is different.

(ii) The post manufacturing expenses which have to be loaded into the assessable value of the final product are also different in the two types of goods.

(iii) The cost value of the samples are loaded into the goods on sale.

3. Revenue is aggrieved over the impugned order on the following grounds:

(i) Cost construction method is to be considered as a last resort only when the sale value of comparable goods is not available and the value of the products cannot be ascertained in any other manner as provided in the Rules.

(ii) In the following decisions, Honble CEGAT has held that the value of physicians samples are to be arrived at based on comparable price of the same goods as provided in Rule 6(b)(i) of the C.E. Valuation Rules, 1975.

(a) CCE, Mumbai v. Charak Pharmaceuticals - 2001 (127) E.L.T. 748 (Tri. - Mum.)

(b) Cheryl Laboratories (P) Ltd. v. CCE, Hyderabad - 1997 (93) E.L.T. 129 (Tribunal)

In the Cheryl Laboratories case, the CEGAT has further held that for valuation of physicians free samples, no adjustment is called for on account of physicians samples being supplied free of cost and also profit motive has no bearing on the valuation under Rule 6(b)(i) of the Valuation Rules, 1975.

4. Shri L. Narasimha Murthy, the learned SDR represented the Revenue and Shri K. Krishnan Kutty, the learned Consultant appeared for the Respondent.

5. The learned Consultant urged the following points :

(i) The physicians samples and the products cleared for wholesale trade are similar only in quality. In all other respects including packing, printing, labelling, etc., the goods are not comparable.

(ii) In respect of physicians free samples, there is no wholesale packer.

(iii) Rule 6(b)(i) can be applied only when excisable goods are consumed by the assessee or on his behalf in the production/manufacture of other articles.

(iv) While applying provision of Rule 6(b)(i), the proper officer has to extend necessary adjustment in the value of comparable goods, which the learned Adjudicating Authority rejected. Hence, the only course left is to adopt Rule 6(b)(ii). Therefore, the OIA is correct and need not be interfered with.

(v) The Supreme Court, in the case of CCE, Meerut v. Universal Glass Ltd. - , has held that comparable goods under Rule 6(b) of CE Valuation Rules, 1975 should be, as far as possible identical goods. Simply because two goods are known by the same name or by the same genre does not mean that they are comparable goods. Even if they are assumed to be comparable, all relevant differences as far as possible should be recognized.

(vi) The Tribunal, Mumbai, in the case of Sun Pharmaceutical Industries v. CCE, Surat-II - , has held that the value of physicians free samples in smaller pack cannot be compared with bigger packs and value of free samples in smaller pack cannot be increased pro rata to price of commercial pack.

6. We have gone through the records of the case carefully. The point at issue is the method to be followed in valuation of physicians samples. Rule 6(b)(i) is the method of valuation on the basis of the price of comparable goods. The Commissioner (Appeals) has given 3 reasons for holding that the physicians samples and the goods cleared for wholesale trade are not comparable. Moreover, the Honble Supreme Court, in the case cited supra by the learned respondent, has held that comparable goods under Rule 6(b) should be as far as possible identical goods. Moreover, the CESTAT in Sun Pharmaceuticals case cited supra, has held that the value of physicians sample in smaller pack cannot be increased pro rata to price of commercial pack by applying Rule 4 of the erstwhile CE Valuation Rules. In the same case, valuation of smaller pack by applying Rule 6(b)(ii) was upheld. Even though, Revenue in its appeal relied on two decisions of the CEGAT, we are of the view that the physicians samples and the goods cleared on wholesale cannot be considered as comparable goods in view of the Supreme Courts decision that comparable goods should be as far as possible identical goods. The Commissioner (Appeals) has reached his conclusions on sound reasoning. Therefore, we do not find any reason to interfere with the impugned order. The Revenues appeal is rejected.

(Pronounced in open Court on 6-6-2005)